When must employees who claim exempt from federal income tax withholdings submit a new W-4?

Employees who claim exemption from federal income tax withholding must submit a new W-4 by February 15. This requirement is rooted in IRS regulations, which stipulate that individuals claiming exemption from withholding need to reconfirm their eligibility annually. By this date, employers need to have any updated information for tax compliance, ensuring that only those properly qualifying for the exemption continue to receive it without withholding.

This timing allows for sufficient processing by the employer to adjust withholding amounts for the upcoming tax year. If an employee fails to submit a new W-4 by this deadline, the employer is required to start withholding tax based on the employee's previous W-4 status, which might not reflect the employee's current tax situation.